It fails to recognise why the current arrangements exist
There are reasons to force someone to be an employee - splitting income with a partner, for example. Businesses have legal, IT and other requirements which do not require a full-time member of staff. They need to be able to get skilled staff to complete those tasks.
Also, large companies often have projects which have a budget for 3 months, 6 months or a year. The managers of these projects simply don't have the authority to hire someone permanent with the limited timescale. If they can't hire a temporary worker, then yes, some will hire someone 'permanent'. However, some projects will be scrapped, and those 'permanent' workers will find they do not actually have job security as they get made redundant when the project funding gets pulled. Only they didn't charge a premium for the uncertainty, so they're then desperately trying to find another job before their rent payment bounces.
It creates a dishonesty by making roles which are definitely temporary look permanent. It hurts businesses, but it particularly hurts employees, who find they don't know if the role they're taking is genuinely permanent or not. My thoughts are that those who are hurt most by the change aren't necessarily even the people it's aiming to crack down on, it's those wanting to be able to progress their career through safe, stable jobs finding that their job security is eroded by this.